Hysteresis versus NAIRU and convergence versus divergence: The behavior of regional unemployment rates in Brazil

The aim of this work is to analyze the regional unemployment rate behavior in Brazil. Firstly, unit root tests with structural breaks were used to determine which theoretical framework – hysteresis or NAIRU – is more appropriate to explain the unemployment dynamics not only in six Brazilian metropol...

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Bibliographic Details
Published inThe Quarterly review of economics and finance Vol. 49; no. 2; pp. 308 - 322
Main Authors Gomes, Fábio Augusto Reis, da Silva, Cleomar Gomes
Format Journal Article
LanguageEnglish
Published Greenwich Elsevier Inc 01.05.2009
Elsevier
Elsevier Science Ltd
SeriesThe Quarterly Review of Economics and Finance
Subjects
Convergence
Economic conditions
Economic theory
Hysteresis
Metropolitan areas
NAIRU
Stochastic models
Studies
Unemployment
Unemployment Unit root NAIRU Hysteresis Convergence
Unit root
Brazil
NAIRU
R23
C22
E24
Unemployment
Unit root
Hysteresis
Convergence
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Summary:The aim of this work is to analyze the regional unemployment rate behavior in Brazil. Firstly, unit root tests with structural breaks were used to determine which theoretical framework – hysteresis or NAIRU – is more appropriate to explain the unemployment dynamics not only in six Brazilian metropolitan areas – São Paulo, Rio de Janeiro, Belo Horizonte, Porto Alegre, Salvador and Recife – but also at national level. Hysteresis is found to be the best choice in five, but Rio de Janeiro. This indicates a high persistence in the Brazilian regional unemployment rate. Secondly, we investigated whether these five metropolitan regions, characterized by the hysteresis effect, show a stochastic convergence. The latter was found in every case, but Porto Alegre.
ISSN:1062-9769
1878-4259
DOI:10.1016/j.qref.2007.03.009